Long-term disability insurance

If you’re currently healthy, disability insurance may seem unnecessary. Becoming disabled, however, is more common than you might think — the Social Security Administration estimates that just over one in four people will become disabled at some point before reaching age 67.

While everyone hopes to avoid a debilitating illness or injury, there could come a time when you’re unable to work and earn a paycheck. Should this happen, long-term disability (LTD) insurance protects you and your family by paying you a portion of your income until you can get back to work.

While enrolling in LTD insurance is relatively straightforward, understanding how it works and choosing a plan can be tricky. Use these pages as a guide to your LTD benefits, and contact us if you need further help.

Enroll

New employees eligible for PEBB benefits are automatically enrolled for UW-provided Basic LTD insurance at no cost. You may also enroll for optional LTD coverage no later than 31 days from your eligibility date for PEBB benefits (see your eligibility notice for your personal eligibility date), without submitting the Evidence of Insurability (EOI) form. After this deadline, you can still apply, but an EOI form for optional LTD coverage will be required, and the insurance company will review your medical history before approving coverage.

Enrolling after 31 days

Once the insurance company reviews your medical history, you will be notified if your LTD insurance is approved, and if so, when it will be active.

Advantages of enrolling early

You can request enrollment in optional LTD coverage at any time. However, consider enrolling early so that your coverage starts sooner, and you avoid the need to submit the EOI form. The EOI form asks you detailed questions about your medical history, which the insurance company uses to determine whether or not to provide you with LTD coverage. Submitting the form gives the insurance company authorization to access your medical records.

You don’t have to submit the EOI form if you enroll in optional LTD insurance within the first 31 days of your eligibility.

Cost and coverage

Basic LTD insurance costs you nothing; coverage is part of your benefits package. Should you lose your income, an approved basic coverage claim pays you, after a 90 day waiting period, $240 per month (it pays less if your salary is below $4,800 per year).

If you want more coverage, you need to buy optional LTD insurance. Then, should you lose your income, an approved optional coverage claim provides a monthly payment equal to 60 percent of your current, pre-disability, income (to a maximum of $6,000 per month).

Coverage isn’t additive. Your insurance payments may be reduced if you have other sources of income. These sources are called “deductible income” or “offsets,” and they are defined in the insurance plan booklet (PDF). For example, if you receive Social Security while you’re disabled, then your LTD benefit payments will be reduced by the amount of your Social Security benefit.

Cost for optional LTD insurance coverage

When you enroll in optional LTD insurance, you pay a monthly premium equal to a percentage of your monthly salary. The cost of the premium depends on which waiting period you choose. You pay more if you choose a short waiting period; conversely, you pay less if you choose a long waiting period.

Employees with the UW Retirement Plan (UWRP) pay a slightly higher percentage than employees with another retirement plan (PERS, TRS, LEOFF) or employees who aren’t enrolled in a retirement plan.

Waiting period

After you suffer a debilitating illness or injury, the waiting period is the length of time between when you stop working and start receiving benefits after your approved claim. In other words, it’s how long you have to wait before the insurance company begins paying you.

During the waiting period you won’t be working, so you won’t be receiving a typical paycheck. You may still be paid, though, if you’ve saved up some sick leave (or another type of leave). Once all your leave is used, you won’t be paid until the waiting period has finished.

Of course, choosing a short waiting period means you’ll get your benefit payments sooner, but you also have to pay more in premiums. When reviewing LTD plans, remember: a shorter waiting period costs more than a longer waiting period. The differences in cost can be significant, so review the options carefully.

Choosing a waiting period

Cost is only one aspect you should consider when choosing a waiting period. You also need to determine which plan best meets your needs. To start, ask yourself: How long could I go without a paycheck?

How you answer this question depends on your personal circumstances, which may include:

Your other sources of income, such as your spouse’s job

Your financial obligations, such a bills, debt, and living costs

How much money you have in savings

How much sick leave you have saved

Even if you can’t determine a precise answer, having a rough estimate will help you make an informed decision.

One strategy to consider

If you’re a new employee and unsure which waiting period you should choose, consider initially selecting a short waiting period. You can always change it later.

This strategy makes sense because you likely have little sick leave accrued, and a short waiting period will provide you the most financial protection. It will cost you more initially, but once you accrue sufficient sick leave, you can increase your waiting period and decrease your premium cost.

Increasing your waiting period is relatively easy; simply download and submit the LTD form, which you can find above or on the HR Forms page.

What is considered a disability?

For LTD insurance claim purposes, the word disability has a very specific definition that may differ from your concept of a disabled person.

A person with a disability is one who can’t work due to an illness or injury. In most cases the condition isn’t permanent — based on insurance claims, the average worker who becomes disabled misses work for about two and a half years. While sometimes an unlucky accident is the cause, most disabilities are due to relatively common illnesses such as neck and back pain, cancer, nervous system disorders, mental health problems, and heart conditions.

There are stipulations, of course, such as what differentiates a fully disabled person from a partially disabled one and what “unable to work” means, exactly. These details are important, and you can review them in the insurance plan booklet (PDF) under the “Definition of Disability” section.

But in order to choose how much LTD coverage you need, you simply need to know that LTD insurance protects your income should you lose, either permanently or temporarily, your ability to work.

When LTD benefits end

In general, the insurance company stops paying you benefits either when you’re no longer disabled or when you turn 65. If you’re older than 61 when you become disabled, you receive benefits for the maximum benefit period, shown in the table below.